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Wednesday, May 13, 2009

Do something about property taxes


This session the Legislature has a chance to do something about property taxes. More accurately, legislators have an opportunity to give you the choice to do something about property taxes.

The Senate is about to consider a bill that would allow some communities the option of voting on a tax and spending cap. It wouldn't impose a cap or automatically schedule a vote. Rather it would make clear that cities and towns with a charter form of government could place a spending cap amendment on their ballots.

This bill as far as it goes isn't all that radical. Five cities have already adopted spending caps: Franklin, Nashua, Laconia, Dover and Rochester. A few more will consider spending caps this November.

Since Franklin adopted its cap 20 years ago, it was generally understood that cities and towns with charters could adopt a charter amendment by collecting petitions and having a vote on the ballot. Renewed interest in spending caps began with Laconia's successful petition drive and adoption in 2005. Since then, Dover and Rochester have followed suit.

But this year, a judge in Concord claimed that its cap would infringe on the city manager's right to bring in whatever budget he saw fit. It seems an awfully odd opinion, but you never can tell with judges these days.

So cap proponents are seeking a law to make clear that charters can be amended to include caps just as five of the state's larger communities, representing 15 percent of the state population, have done.

The law would not endorse spending caps, merely allow communities who have already chosen to have a charter form of government instead of town meeting to adopt a budgetary restriction if they so choose.

If it were me, I would go a step further. Current understanding is that only towns or cities with charters can have a spending cap. Towns with town meeting or the SB2 form of government cannot. I don't see why any town ought not to be able to adopt a spending cap if it chooses to do so.

In the last few years, supporters of an income tax have placed nonbinding resolutions on town meeting ballots expressing annoyance at our increasing property taxes. Their preferred solutions is to add an income tax on top of the property tax.

Voters in Sunapee had a better idea. Sunapee voters, annoyed at their increasing taxes, adopted the resolution. At the same time, they also adopted a nonbinding resolution urging selectmen to cap spending increases at the rate of inflation.

Because Sunapee has a town meeting, the resolution was nonbinding, but why shouldn't it, too, have the same choice as Nashua to cap spending?

Income tax supporters would have us believe that we could lower our taxes if we adopted another one. Yet history suggests otherwise. The last two states to adopt an income tax were New Jersey and Connecticut. In each case, the ostensible reason was to lower property taxes. It didn't work. The two states in the country with higher property taxes than New Hampshire are Connecticut and New Jersey. And they pay an income tax on top of it. And a sales tax.

In reality, taxes go up because spending goes up. They increase bit by bit over time when increases are a few percentage points higher here and there. Most politicians are under pressure to increase spending from existing programs, employees and people with ideas that will just cost a little bit of money.

A spending cap creates a framework for them to work within, imposing a discipline from the outside that human nature is reluctant to supply on its own. Massachusetts adopted a similar idea with its Proposition 2½. Property tax increases were capped with a provision to override the cap if circumstances called for it. Overrides happen frequently across the state, but property taxes are held in check most years. As a result, property taxes in Massachusetts went from being the second or third highest in the country to 22nd highest in the first decade of the law.

In New Hampshire, when Franklin adopted its cap 20 years ago, it had the highest property taxes in the state. Now they're below average.

The law being considered by the Senate doesn't impose caps on any community. It doesn't require a community to hold a vote. It merely allows them to do so. That seems reasonable enough.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

1 comment:

  1. Two very good studies proving that sales tax or income tax or both do NOT lower property taxes.